Raymond James Upgrades Chewy (CHWY) on Attractive Valuation

Raymond James Elevates Chewy to Outperform

Raymond James has upgraded Chewy (CHWY) from Market Perform to Outperform, establishing a new price target of $28. The upgrade follows a significant 33% decline in the company's stock price since its third-quarter financial results, a period during which the S&P 500 remained flat.

Valuation Creates Attractive Entry Point

The brokerage firm highlights that the recent stock pullback presents an appealing investment opportunity. Chewy is currently trading at approximately 8 times its enterprise value to estimated 2027 EBITDA. This valuation is substantially below its three-year average of 22x, signaling a potential undervaluation.

New $28 Price Target Set

The $28 price target is based on a valuation of roughly 10 times enterprise value to fiscal 2027 EBITDA estimates. Raymond James notes this multiple represents a discount compared to historical levels, a move intended to reflect expectations for slower future growth for the online pet supplier.

Summary

In conclusion, Raymond James views the current market expectations for Chewy as conservative. The significant drop in share price has reset the valuation to a level that the firm considers an attractive entry point for investors, despite projecting more moderate growth ahead.

FAQ

Q: Why did Raymond James upgrade Chewy stock?
A: The upgrade was driven by a 33% drop in Chewy's stock price, which created what the firm sees as an attractive valuation and entry point for investors.

Q: What is the new price target for Chewy (CHWY)?
A: Raymond James set a new price target of $28 for Chewy's stock.

Source: Investing.com